What Is Business Ethics?

Ethics, one person told me, is what you do when no one is looking.

The corollary is the old adage, "Don't do anything you wouldn't want printed on the front page of the morning paper."

what is business ethics, small business, entrepreneurs,  nonprofit leadersWould BP have made the same decision about that valve – taking the cheaper, faster solution – if the execs had thought about the front page? I think not.

So the easy answer to "What is business ethics?" is that ethical business is business practices that you are happy to have your customers, your suppliers, your bank, your shareholders, and your employees know about. 

If you pay your delivery people less than minimum wage, you probably don't advertise that: unethical.

If you buy the goods you sell from the lowest bidder who happens to employ child-labor in a sweatshop ... well, you get the idea.

The practices mentioned above break the law so they're easy to label. So, too, are violating the rules of your own workplace, such as the university medical professor who lauds the benefits of a drug but fails to disclose that he's being paid mega-bucks to do so. Does his absolute belief in the efficacy of the drug remove his ethical obligation to disclose? 

Does the question "What is business ethics?" lend itself to answers qualified by sincerity or intent? Or is the real answer, "If you have to ask, you shouldn't do it."

Let's look at the nonprofit that knows funders frown on overhead greater than 13 percent of budget yet real progress requires updating infrastructure. Is it ethical to hide those expenses in non-administrative categories? The mission will be served but will ethics?

My four ethical guidelines:

  1. Ethics requires that you meet your obligations and deal fairly with other businesses. Not long ago, I wrote about a consultant who advises his client businesses to make late payments; It's a way to get an interest-free loan, he said. Not illegal. Certainly unethical.
  2. Ethics requires honest value. Late in the evening, I see flower vendors pulling the outer, aging petals off roses to create a younger-looking flower. These rejuvenated bouquets are sold the next day at the same price they were sold when fresh, at the same price as the new day's fresh bouquets. Just business or unethical? 
  3. Clear statements of what you will give the customer. No obfuscation. A friend was happy to see an advertisement from his neighborhood pet store: 20 percent off anything that fits in our 5-gallon bucket. But when he put a bag of pet food in the bucket, the discount suddenly disappeared into, "There was a disclaimer in that ad."  The disclaimer was in very, very fine print, so well hidden as to make the ad deceptive, although not illegal. 
  4. Respect for employees. How about hiring an employee with the promise that good work will lead to a raise in six months, a promise you have no intention of keeping or in six months, despite good work and a profitable business, you give the raise to your nephew?

The bottom line: What defines business ethics is, I think, the intent to treat people fairly and honestly, and actions to accomplish that.

Business ethics must be imbedded in the culture of the organization, from the way it designs products/services to the development of ad campaigns, from the manner in which customer complaints are dealt with to the way in which employees are trained and compensated. 

Business ethics is the one place where "top-down" is critical. The business owner, the CEO, the executive director must value ethical behavior. This is especially true of small businesses and start-ups.

Ethical practices at business are tied to ethical practices in our personal lives. For social entrepreneurs, small business owners and, yes, nonprofit leaders, ethical practices will be defined by their personal moral code.

But that old adage seems like a good guideline: When faced with an ethical dilemma, choose the option you'd like to see in the morning paper.

Ethics starts with the business itself

Business ethics starts with the nature of the business itself. Businesses need to ask if their purpose is seeking profits at any cost, or creating value in the world. You can respect your employees by paying them fairly, but if your main business is manufacturing plastic bags, is the business itself ethical?

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